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ASIC has expressed concerns over rising house prices causing a property bubble, just as the Reserve Bank of New Zealand announced new restrictions on lending to investors in Auckland.

In an interview with the Australian Financial Review, ASIC Chairman Greg Medcraft warned that rising house prices in Sydney and Melbourne were showing signs of a property bubble.

“History shows that people don't know when they are in a bubble until it's over,” Medcraft told the AFR.

“I am quite worried about the Sydney and Melbourne property markets. In housing, the long-term average income to average price ratio is four to five times but at the moment it is at historic highs.”

The ASIC Chairman said the Reserve Bank of Australia's decision to cut rates to a historic low of 2% in May was fuelling investor demand.

“There is always danger when rates get so low. That's when people start borrowing when they can't afford it. What generally happens is rates starts to rise which affects your ability to pay, and rate rises can actually bust a bubble, so you end up with a double whammy,” he said.

Medcraft’s comments come just after the Reserve Bank of New Zealand announced that starting 1 October 2015, bank lending to home investors in Auckland will be restricted to mortgages with an LVR of less than 70%.

“We are proposing these adjustments to the LVR policy to more directly target investor activity in the Auckland region, where house prices relative to incomes and rent are far more elevated than elsewhere in New Zealand,” Reserve Bank governor, Graeme Wheeler said.

“The objective of this policy is to promote financial stability by reducing the rate of increase in Auckland house prices, and to improve the resilience of the banking system to a potential downturn in the Auckland housing market.”

According to CoreLogic RP Data, Auckland house prices increased by 14.6% over the year to March 2015. The RBNZ reports that about 40% of mortgage originations in Auckland are to investors.

Meanwhile, CoreLogic RP Data statistics reveal Sydney house prices increased by 14.5% in the year to March 2015, while the RBA reports that about 45% of home loan approvals in Sydney are to investors.